1st November 2014

Landlords
of older properties will be affected too as tenants get more choices

Source: Straits Times / Money

Potential condo glut in Dairy Farm, Hillview area

IT'S fast
turning into a tenants' market with an impending flood of new apartments set to
drive down rents.

Landlords
have less reason to cheer, given that they are already battling the effects of
cutbacks on foreign employment and shrinking expatriate housing budgets.

Market
experts warn that it is not just owners at newly completed developments who
might have difficulty finding tenants or securing higher rents. Investors at
older properties nearby are likely to feel the heat from the sheer number of new
units as well.

"When
many get the keys to their new houses at the same time, there could be as many
as 30 to 40 people who want to rent out their units all at once," said
PropNex Realty chief executive Mohamed Ismail.

"Existing
tenants in older flats nearby will always think about moving across to a newer
flat, with brand new furnishings.

"And
these new units may end up having a lower rental rate because of the
competition."

Industry
players have long flagged the mounting supply of new condominium units as a
pressing concern. In the past year alone, about 16,000 non-landed private homes
were completed, according to Urban Redevelopment Authority figures.

Look further
ahead and the situation becomes even more alarming for landlords: There are
25,000 new units expected to be completed between this quarter and the end of
next year, with more than half in the suburbs.

A
significant proportion of the 16,000 already built in the past year have been
erected amid clusters of new homes, indicating that certain parts of the island
are already experiencing a sudden supply glut, according to consultants DTZ.

About 2,300
units have been completed over the past year in the Katong, Joo Chiat and Amber
Road precinct, also known as District 15. This includes The Shore Residences, a
408-unit condo, and the 383-unit Silversea - both developed by Far East
Organisation.

Another 239
units at Hong Leong Holdings' The Meyerise condo were completed this year.

In District
19 - which encompasses Punggol, Sengkang and Hougang - 2,300 new units have hit
the suburban precinct in the past year.

This will be
followed by a further 3,000 condo units over the next 12 months, with the
completion of projects such as Sim Lian's 882-unit A Treasure Trove and Keppel
Land's 622-unit The Luxurie.

"Because
these areas have seen the largest increase in the supply of non-landed units in
the past year, they are likely to see the most rental pressure as tenants would
have a wider selection of options, increasing their bargaining power,"
said DTZ research director Lee Lay Keng.

Experts note
that areas that are well-connected to transport nodes or have malls and popular
schools could have enough rental demand to soak up the fresh supply.

Still,
landlords with units in outlying districts do not just face competition from
new completions in the immediate vicinity, said Ms Lee.

"Tenants
who intend to rent a unit in a suburban condo can rent a unit anywhere in the
suburban areas, all things being equal, unless they have very strong reasons
for living in a particular area," she added.

DTZ's
analysis also showed that median rents at older condos slipped in the six
months after completion, although they picked up subsequently.

At The
Interlace, a 1,040-unit project in Depot Road, median rents fell 12 per cent to
$3.04 per sq ft (psf) six months after it was completed.

In the three
months after it was ready for occupation, rents at the 775-unit condo The
Anchorage in Alexandra Road slipped 8 per cent to $3.03 psf.

Elsewhere,
the numbers point to a potential glut in the vicinity of Dairy Farm Road and
Hillview Avenue.

Two new
condos were completed there in the past year - accounting for 710 apartments -
but supply is gathering pace with at least 1,500 additional units from three
new developments due for completion by 2016.

These will
add to a substantial supply from the handful of older projects nearby.

SP Setia's
483-unit Eco Sanctuary, which was launched in 2012, is expected to be completed
in two years.

Far East's
mixed-development The Hillier is partially completed.

It opened
the commercial component hillV2 earlier this year. The 528 residential units
are expected to be ready next year.

Said PropNex
Realty's Mr Ismail: "As long as the Government is stringent in bringing in
foreigners, obviously there will be a correction in rents. It's a matter of
time, demand and supply."

THE largest
local bank has given its Singapore mortgages a clean bill of health.

DBS Group
Holdings chief executive Piyush Gupta said the bank has not identified any
stress in its Singapore home loans.

Housing
non-performing loans (NPL) came in at $110 million in the third quarter ended
Sept 30 - unchanged from the previous quarter and down from $119 million in the
same period a year earlier.

It is doing
better in this segment than the other two local banks. OCBC and United Overseas
Bank (UOB), which both reported quarterly earnings on Thursday, saw housing
NPLs rise. OCBC's third-quarter housing NPL was $272 million, up from $253
million in the previous quarter and $227 million last year. UOB's housing NPL
was $502 million, up from $447 million in the previous quarter and $295 million
last year.

DBS'
mortgage book here could grow by about $3.8 billion this year, up from original
forecasts for a loan growth of between $2 billion and $2.5 billion, Mr Gupta
said.

One reason
is that a larger percentage of its loans goes to those buying HDB homes as well
as those buying units to live in, rather than for investment purposes, he said.

Another is
that DBS seems to have defended its turf well.

"The
outflows have been much, much softer than we expected. Typically, you'll lose
(some) amount of mortgage growth because of refinancing out, because of
property sales, disposals," he said.

"That
activity has slowed down and therefore, the attrition is much, much slower than
we anticipated," he added.

He said
Credit Bureau Singapore data showed DBS' delinquency rate for home loans is
"substantially better". Its delinquency rate is 30 basis points lower
than the industry average.

BANK lending
flatlined in September as concerns about global economic conditions forced
businesses to become more cautious.

Total bank
loans came in at $604.5 billion, a dip from the $604.6 billion disbursed in
August, according to preliminary data from the Monetary Authority of Singapore
(MAS) yesterday.

It's a
reversal from August's 1.2 per cent increase over July.

While credit
growth has risen every month, compared with the same period a year ago, it is
trending towards a slower pace.

Overall
loans in September - comprising both business and consumer lending - was 10.6
per cent up on the $546.6 billion disbursed in the same period a year ago.

August
lending rose 11.8 per cent over the same month last year, while July lending
increased by 10.8 and June loans were up 12.3 per cent.

A drop in
business loans mitigated the rise in consumer lending in September.

Lending to
businesses in September came in at $370.9 billion, a fall of 0.4 per cent over
August's $372.2 billion. Loans to major sectors, like manufacturing, building
and construction, general commerce as well as transport, storage and
communication, all fell from August.

CIMB
economist Song Seng Wun said business owners are holding back in a more modest
economic environment.

"A
sombre assessment of growth prospects for this year and next year, together
with volatility in the financial markets and slowing growth momentum in the
region, have impacted the business environment," added Mr Song.

"They
are being more selective and making a more careful assessment in terms of
expanding and hiring."

Consumer
loans, meanwhile, rose 0.5 per cent over August to $233.6 billion.

Housing and
bridging loans, the largest lending category, rose 0.6 per cent to $174.5
billion, better than August's 0.5 per cent rise over July.

DBS
economist Irvin Seah said: "The macro-prudential measures which the
Government introduced will continue to have an impact on consumer loans, with
transaction volumes moderating and prices also easing as well."

Car loans
fell for the 26th straight month, dropping 1.7 per cent from August to $9.05
billion.

NEW measures
aimed at raising the percentage of higher-skilled workers in the construction
industry reinforce ongoing efforts by firms to upgrade their employees,
construction companies told The Straits Times.

Companies
say their efforts were already under way, even before new regulations requiring
companies to have a minimum percentage of higher-skilled workers were unveiled
on Thursday.

Still, firms
said it remains to be seen whether efforts to help lift the sector out of its
productivity slump will pay off in the long term.

The new
regulations, announced on Thursday by Deputy Prime Minister and Finance
Minister Tharman Shanmugaratnam, require at least 10 per cent of work permit
holders in each firm to be classified as higher-skilled, and will take effect on
Jan 1, 2017.

The move is
part of a raft of measures aimed at building a more productive construction
workforce and encouraging firms to retain higher-skilled work permit holders.

The changes
will be phased in over the next two years to give firms time to adapt. Those
that fail to meet the targets will face curbs on hiring.

About 60 per
cent of firms already meet the new requirement. Of the remainder, most - about
80 per cent - need to upgrade one or two work permit holders over the next two
years.

Employers
told The Straits Times they are already making efforts to raise skill levels,
and do not foresee problems meeting the requirements.

"The
requirements are not hard to meet," said Mr Peter Chew, managing director
of CAK & FG Survey, which employs about 90 work permit holders. Just 5 per
cent of them fall into the higher-skilled category.

"We
always encourage our workers to study, and we do send them for engineering
survey courses with the Land Surveyors Board," he said.

Firms
already meeting the requirements say a more productive team is essential given
that the industry is already being squeezed by higher foreign worker levies and
tighter hiring quotas.

Straits
Construction executive director Kenneth Loo said more than 20 per cent of its
500 work permit holders are classified as higher-skilled. "We will
increase this percentage if possible, because with the tightening regimes in
place, we need to expect as much work as possible from each worker," he
said.

Mr Augustus
Peh, managing director of commercial interior renovation firm Spacelogic, said
the company trains its workers with the aim of eventually promoting them to
managers.

"We
need to upgrade them so that they can work towards becoming managers... We want
to retain them, because once they get used to the work, they become more
efficient," he said.

About 40 per
cent of its 50 work permit holders are higher-skilled workers.

Larger firms
and main contractors are likely to have an easier time complying, but smaller
subcontractors - whose labour requirements tend to fluctuate from project to
project - might struggle, said Santarli Construction general manager Andrew
Seet.

Thirty per
cent of its 120 work permit holders are higher-skilled.

Mr Richard
Teo, project manager of CHL Construction, said the workers he had sent on
training courses came back more safety-conscious. But training can only do so
much.

"There
are always good workers and bad workers. Productivity also depends on their own
qualities. Some can have better skills but they don't contribute much to
productivity," he said.

ON TOP of
its rich history as the former site for the British naval and air bases, the
Seletar district is also an up-and-coming neighbourhood.

The shopping
prospects are about to get a much-needed jolt in the form of the upcoming
Seletar Mall, while a range of housing options is also emerging in the wake of
the new aerospace park.

The
four-storey mall at the junction of Sengkang West Avenue and Fernvale Road
opens soon. It has already secured tenants for more than 90 per cent of its
space. These include FairPrice Finest supermarket, Shaw Theatres and Foodfare,
as well as big brands Uniqlo, BHG and Amore Fitness.

Seletar
Mall, which also has two basement levels of retail, comes with a gross floor
area of 284,000 sq ft and net lettable area of 188,000 sq ft.

The project
is a joint venture between Singapore Press Holdings (SPH) and United Engineers
Developments.

Mr Wong Xian
Yang, manager of research and consultancy at OrangeTee, noted that the mall
would be welcomed by residents as it is in a "still-sleepy" area with
few retail offerings.

"The
good tenant mix will also liven things up in the district, appealing especially
to young families living there," he added.

Other malls
in the vicinity include Fernvale Point in Sengkang West, Greenwich V in Seletar
Close and Ang Mo Kio Hub in Ang Mo Kio Avenue 3.

Property
consultants told The Straits Times that they expect buying interest in the area
to be good as well, thanks to the Seletar Aerospace Park, which will serve the
aviation industries when completed by 2018.

Mr Wong
noted that the aerospace park is expected to "drive job creation and boost
demand for nearby properties".

PropNex
chief executive Mohamed Ismail said: "There is also high potential for
future capital appreciation... as the industrial park will serve as a key
attraction to professionals and services to the area."

Resale
prices in the area rose 53 per cent from 2010 to the third quarter of this
year, although new home launches dipped 4 per cent over the same period.

At the same
time, a spate of new projects has enlivened the area, including The Greenwich,
the 99-year leasehold residential component of a mixed development in Seletar
Road.

The
319-apartment condominium has sold units at an average price of $1,210psf over
the past six months, according to Squarefoot Research.

Units at the
99-leasehold Seletar Park Residence, which is just behind The Greenwich, have
sold at an average price of $1,239 psf in the past six months. It is expected
to be completed by the end of this year.

Floravista
and Floraview in Cactus Road was launched by developer Oxley YCK in January.
The freehold units have been going for an average of $1,267 psf.

Mr Wong
singled out Floraview as a "good deal" for investors, pointing to its
lower selling price in comparison with the neighbouring Floraville condominium,
which has average prices of $1,288 psf.

Mr Ismail
noted that these projects are in a residential precinct "rich with
Singaporean history".

"The
fact that these are near a wide array of amenities but still nestled in a
serene and tranquil environment would be appealing for buyers who want a bit of
quiet."

MORE
temporary flats will be set aside for couples waiting for their new Housing
Board flats under a rental programme which, as National Development Minister
Khaw Boon Wan put it, has been "delivering results, and babies".

Under the
rental programme, called the Parenthood Provisional Housing Scheme (PPHS), more
than 100 babies were born to those living in 1,000 or so flats - a hit rate of
10 per cent.

This result
was not bad, said Mr Khaw.

The
popularity of the scheme - and its success in raising fertility - has prompted
the Government to allocate another 800 temporary flats for couples from next
year.

And to ease
costs, couples can co-rent these flats.

"Helping
young couples set up their first home so that they can start their family early
is our top priority," Mr Khaw said in a blog post yesterday.

The scheme
began in January last year with 1,150 flats in Ang Mo Kio, Bedok, Boon Lay and
Dover. Rentals range from $800 for a three-room flat in Boon Lay to $1,900 for
a Dover five-roomer.

The flats
can be rented by first-timer married couples with children under 16, who are
waiting for Build-To-Order (BTO) flats. In April, the scheme was extended to
those without children, and in September, to married couples who are
first-timers and second-timers, as well as divorced or widowed parents with
children.

"This
is a good scheme which has been well received," said Mr Khaw yesterday.

So far, 110
babies have been born to those in PPHS flats. He said this was "not bad at
all".

About 800
more flats, some in Bukit Merah and Queenstown, will be retrofitted and rolled
out to couples from early next year.

From today,
both new applicants and existing tenants can apply to co-rent and co-pay for
PPHS flats. A maximum of two families can share a flat.

"This
will be useful for those who feel that they do not need a whole flat,"
said Mr Khaw.

Co-tenants
will settle co-renting details privately, such as how much each tenant will pay
and how the bedrooms will be divided.

Mr Gerald
Teo's family lived in a PPHS flat for about a year, before getting the keys to
their BTO flat in May. He and his wife used to live with her parents, but the
flat "got a bit too cramped" when their son was born, said Mr Teo,
28, who works in finance.

THE future
hangs in the balance for farmers in Lim Chu Kang, who will not have their
leases renewed as their farms have to make way for army training grounds.

A total of
62 farms, ranging from vegetable plots to frog breeders, will have to move out
between 2017 and 2021, after their leases expire.

Despite
being told of the decision by the Singapore Land Authority in September, they
have yet to get details of exactly where they will move to, and the size of the
plots available for tender.

Said Mr Alan
Toh, 50, who owns the 4ha Yili Vegetation that produces Chinese cabbage and
baby bok choy: "We cannot decide whether to bid on the new land plots or
not because we still do not know much at the moment."

However,
farms whose leases run out between this year and early 2017 will be given an
extension until June 2017 to move. The land has been slated to replace the
Defence Ministry's current training grounds, which it is giving up for the
development of Tengah New Town, according to the Agri-Food and Veterinary
Authority of Singapore (AVA).

Ten farmers
The Straits Times spoke to said they had expected to have their leases
extended.

Orchid
farmer Lim Kah Hin, 54, for instance, built a $500,000 greenhouse last year,
and had expected at least two more three-year renewals on his lease, which
expires in 2017, because nearby farms had been approved to stay on until 2021
or longer. "I would not have built it if I knew I was going to move,"
he said of the greenhouse.

Fish farm
Apollo Aquaculture Group's chief executive, Mr Eric Ng, 41, has started talks
with architects, but is still waiting to hear details of available plot sizes.
"We are prepared to move and pump in money at the new place," he
said. "But we still do not know the type of land we are going to
get."

The planned
move has also shaken the confidence of farmers who hope to pass on the family
business. Previously, they held the land for 20 years, but now will be given
only a 10-year lease after they secure a new site, with the possibility of
extending for another decade.

Farm 85
director Tan Koon Hua, 46, said: "I am reluctant to ask my children to
take over when I am not sure of the future of my farms." He has three
affected vegetable farms totalling 10ha.

The AVA said
farmers who demonstrate a good track record with consistently high productivity
will be assessed favourably in their bids for new land. It said the new sites
in Lim Chu Kang and Sungei Tengah will be smaller, and will be available for
tender from next year.

To help
farmers manage with less space, the AVA has launched a $63 million fund to help
them invest in high-tech farming equipment and systems, which should help
"raise their productivity and intensify the use of limited farmland".

Still,
farmers say they have only a few months to decide if they want to move or leave
the business. Mr John Hay, 60, of Hay Dairies, which produces goats' milk,
said: "That is not enough time. It is a multi-million-dollar
investment."

Added frog
farmer Chelsea Wan, 31: "We will move if the return on investment makes
sense... but it is hard, with only a 10-year lease."

YOMA reported earnings of $800,000 for the second quarter of 2015,
but its profits are below expectations. We have cut fiscal 2015 and 2016 core
profit forecasts by 24 per cent and 6 per cent respectively due to
weaker-than-expected operating results. But we believe its current share price
has factored in these shortfalls.

Despite challenges in Myanmar, Yoma continues to sell more
properties and has diversified into fast-growth areas like KFC restaurants.
They may not contribute materially in the near term but we are optimistic about
their prospects. Hence we maintain our "buy" call.

THE car has taken a back seat for Singapore's chief urban planner,
Mr Lim Eng Hwee.

After several outings with cycling enthusiasts for two years, the
49-year-old now cycles at least twice a week to work, pedalling 15km between
his home in Frankel Avenue and his office in Maxwell Road.

His decision to switch from four wheels to two is partly prompted
by his work.

He is chief planner of the Urban Redevelopment Authority (URA) and
its deputy chief executive officer.

The post puts him in charge of implementing Singapore's urban
planning and land-use policies but it is also significant that the URA is the
agency that unveiled the National Cycling Plan last year as part of the
nation's land-use masterplan.

A $50 bicycle was his way of getting around Harvard University in
1997, when he was doing his Master in Public Administration course in the US.

But he stopped cycling when he returned home. "Singapore was
not a place to cycle," he said, recalling a few close shaves with buses on
the roads.

However, his return to biking has opened his eyes to gaps in the
existing infrastructure.

"You discover how you can make things easier. Little details
count. Like whether there's a small kerb and whether the drain grating lies one
way or the other because if it's parallel to the rider and you're using a
bicycle with slim tyres, your wheel can get trapped and you may fall," he
said.

But more importantly, the commute has become a journey of joy.
"I take the park connector to East Coast Park and I see groups of people
jogging, doing tai chi or folk dance... You definitely start your day on a
better note."

Cycling has also given him a new perspective of the development
projects he oversees and whose sites he visits regularly.

He takes the MRT to these places, and it has given him ideas on
ways to improve the train stations and pedestrian paths.

"If you're driving, you zoom past many places. Cycling is
slower, so you see a lot more things," he said.

This fresh perspective is one reason the URA office now has
folding bicycles that staff can use for such visits. They are encouraged to
take them on the train or in their car to complete the "last mile" to
the work site.

But Mr Lim has no plans to sell his car, which he uses on weekends
for the family and trips to the market, and on days when he has to go to
meetings at different places.

"Cars are useful but you need not own one... The important
thing from the planning point is to make non-motorised transport options as
pleasant, friendly and convenient as driving," he said.

Omega offered 0.90 of a share for each Aviv share, equivalent to $34.97 per share, Hunt Valley, Maryland-based Omega said in a statement today. That’s about 16 percent more than Aviv’s closing stock price yesterday.

Real estate companies are taking advantage of the growing demand for medical services and nursing homes as the U.S. population ages. In August, NorthStar Realty Finance Corp. agreed to buy Griffin-American Healthcare REIT II for about $3.4 billion. Ventas Inc. in June said it would purchase American Realty Capital Healthcare Trust Inc. for $2.6 billion.

Omega Chief Executive Officer Taylor Pickett will lead the new company, which will have 874 properties. Aviv Chairman and CEO Craig Bernfield will join the board.

“The combined company will have unrivaled resources to pursue attractive acquisition and development opportunities,” Pickett said in the statement. It “will also have the human and capital resources to pursue new operator relationships for continued external growth.”

Aviv REIT went public in March 2013, raising $264 million in its initial stock offering. Shares of the Chicago-based company climbed 12 percent today to $33.73 and have gained 42 percent this year. Omega fell 1.8 percent today to $38.16.

The companies expect to complete the deal by the end of March. Omega shareholders will hold about 70 percent of the enlarged company. Partners at Aviv Healthcare Properties LP will own the rest.

Hilton, which earlier this month agreed to sell the property on Park Avenue to China’s Anbang Insurance Group Co., is looking at hotels in U.S. gateway cities and resort properties, Chief Executive Officer Christopher Nassetta said today on a third-quarter earnings call with analysts.

“We’re looking both at large single assets and portfolios, with a focus on the upper-upscale and luxury segment,” he said. “And they’ll be a mixture of assets that are pre-existing in our portfolio of brands, and those that are not, with the objective to have a blend of things.”

Hilton said it will have more specific details on assets and markets in the next 60 to 90 days. The company is seeking to spend the Waldorf proceeds in a so-called 1031 exchange, to defer the payment of capital-gains taxes. Hilton’s sale of the 83-year-old Art Deco building, which occupies an entire block in midtown Manhattan, is the largest ever for a U.S. hotel, according to research firm Lodging Econometrics.

Last December, McLean, Virginia-based Hilton, majority-owned by Blackstone Group LP, raised $2.71 billion in a record initial public offering for the hotel industry.